New York City’s Tech Boom No Fluke: Report

New York’s technology jobs boom is here to stay, according to a new report.

Led by a bevy of start-ups including Foursquare and Gilt Groupe, as well as West Coast companies like Google and Facebook that have set up East Coast outposts, tech employment in the city has reached a level not seen since the dot-com boom days of the late 1990s.

But unlike the last tech boom, New York is well positioned to withstand a decrease in venture-capital financing or another economic recession that puts small start-ups out of business, according to the report, New Tech City, published today by The Center for An Urban Future, a New York-based think tank.

New York’s tech renaissance has occurred as the city’s traditional sources of jobs and wealth have declined. The city now has 52,900 people working in the information-technology sector, up 28.7% from 2007. Meanwhile, jobs in the two fields most closely associated with the city–finance and publishing–have declined by 5.9% and 15.8%, respectively, over the same period.

The last time that New York tech employment reached such a high was in 2000, when 47,200 people were working in computer systems design and related services, according to the New York State Department of Labor. But in 2001, the economy slipped into recession, and the city’s economy was shaken by the September 11 terrorist attacks. Venture-capital investment in technology plummeted as a whole, and New York tech employment dropped precipitously. By 2003, the city had lost 14,100 tech jobs.

While Silicon Valley was also hit hard by the shuttering of businesses and layoffs, its strong foundation as a tech center sustained many businesses and jobs. Today, New York’s tech scene has begun to build an ecosystem that can weather downward shifts in the economy, the report says. The New York Tech Meetup, the monthly gathering of technologists to show off recent projects, now has 23,300 members, double the number from 2009. The city has 12 incubators, shared co-working spaces that provide funds and resources to tiny start-ups, compared with just a few before 2009, according to the report.

The city is also benefiting from technical advancements like cloud computing that allow entrepreneurs to start companies with far less money and employees, keeping them “lean.” In addition, whereas a decade ago much of the technology sector was focused on solving infrastructure and networking problems, today’s tech scene is “about applying technology to traditional industries” like fashion, finance and media, says Jonathan Bowles, an author of the report and director of the The Center for an Urban Future. The city’s traditional strengths in these industries also positions it well to capitalize on these disruptions.

The report cautions that while optimism about New York’s tech scene is warranted, exuberance is not yet. Of the major tech IPOs in recent years, none was based in New York. Whereas Boston has 30 tech firms worth over $1 billion in market capitalization, New York has only a few. Other potential barriers to growth include poor Internet bandwidth service, expensive real estate and a high cost of living.

Bowles acknowledges that companies will fail and the city’s tech sector will ebb and flow. Still, he says, New York has created the foundation for it be a long-term tech hub.

“It’s not going to be inexorable ride up; it’s going to go up and down,” he says. “But the long term trend is that we don’t see tech falling off a cliff like it did in 2000. New York is really building something sustainable.”

Other Notable Findings from the Report

– Over 1,000 tech start-ups have been founded in New York over the past five years.

– There were 165 tech-related venture-capital deals in 2011, almost as many as 2006 and 2007 combined.

– 28 New York-based tech start-ups were founded by students from Harvard Business School.

– Half of Tumblr’s 103 employees relocated from elsewhere to move to New York.

– Venture-capital deals rose by 32% in New York between 2007 and 2011, while they declined in virtually every other tech hub, including Silicon Valley and New England

Joseph Walker is a reporter for FINS.com, The Wall Street Journal’s jobs and career website.